Kinside wants families to make the most of their dependent care flexible spending accounts

The cost of childcare is one of the biggest financial burdens American families face. Even dependent care flexible spending accounts, pre-tax benefit accounts meant to reduce caregiving costs, can be an extra stressor because they involve filling out many forms. Kinside, a startup in Y Combinator’s current batch, wants to help by automating the claims process. It also serves as a childcare management tool, letting parents pay their care providers with a Venmo-like feature while making it simpler for companies to offer childcare benefits, like matching costs, that can help attract talented employees. Kinside is still in beta, but it’s already been adopted by several tech companies, including Le Tote.

Kinside’s three founders—CEO Shadiah Sigala, COO Rob Bircher and CTO Abe Han—were motivated to launch the startup after realizing that dependent care FSAs (which can also be used for other caregiving-related costs, like elder care) are vastly underutilized.

“Even though upwards of 70% of companies offer this FSA, we found in our conversations with numerous companies that maybe 10% of eligible parents are using this benefit,” Sigala says. “From an employee experience perspective, we are really taking on a very onerous, traditional FSA product and streamlining the payments process, not only for employers to offer this benefit very seamlessly, but also streamlining the process for parents to take advantage of this benefit.”

One reason eligible employees forgo their dependent care FSA benefits is the claims process, which can take weeks to process and involves collecting receipts and uploading them onto a website (snail mail and fax are other options). As parents, Kinside’s founders have experienced firsthand the headache of dealing with dependent care FSA forms at previous jobs.

“Some of the products we’ve seen already look a decade old, with multiple screens of input. They are really clumsy, so from a modern Web app and UX experience, Kinside brings it up to speed,” says Han.

Kinside also takes advantage of the trio’s past experience in the payments and benefits space. Before launching Kinside, Sigala co-founded HoneyBook, a CRM for entrepreneurs in creative fields. Han also worked at HoneyBook as lead software engineer, while Bircher was senior vice president of sales and marketing at healthcare benefits tech company Picwell.

The team’s goal is to not only encourage use of dependent care FSAs, but also relieve the mental load for harried parents. To sign up for Kinside, they enter their childcare provider’s information on its Web app and connect a bank account. Kinside then makes automated childcare payments with funds from their FSAs and bank accounts or sends payment reminders. It keeps receipts and at the end of the year provides parents with a tax form.

“This couldn’t be done five years ago because there wasn’t a modern payroll. There weren’t modern payments services that existed and we didn’t have APIs for payment and payroll services,” says Sigala. “A lot of employers offer dependent care FSAs already, but they are very receptive to our service because they are looking for products that will improve the experience.”

“They know that you have to offer more than a trivial benefit like free lunch or a foosball table,” says Sigala. “Childcare is more expensive than healthcare, or as expensive as rent. Healthcare is eating up to 20% of a Bay Area family’s income.”

One of Kinside’s selling points is enabling small to mid-sized businesses to offer competitive benefits, too. “You see solutions that cater to larger employers, like on-site daycare centers, that are very inaccessible to smaller to mid-sized companies,” says Bircher. “We want to fill a void that we thought existed for SMBs and this was one way to do it.”

As more companies turn to better family benefits to boost recruitment and retention, it’s conceivable that other startups will also look at ways to make using Dependent Care FSAs easier. Sigala says one advantage Kinside has is the founding team’s prior experience, which means they know the right distribution channels. The startup is looking at ways to help parents get more use out of the money they put in their FSAs by partnering with eligible childcare-related services. It also wants to work with companies that pre-screen providers, so Kinside can potentially address all steps of the childcare process, from finding a trustworthy carer and paying them on time to preparing year-end tax forms.

“Parents are going to pay an arm and a leg for childcare already,” says Sigala. “If we can help them get tax-free dollars toward childcare, that’s what we want to do.”